| Commitments and Contingencies Disclosure [Text Block] |
14.
COMMITMENTS
AND CONTINGENCY
As
of May 31, 2012 and May 31, 2011, the company has the
following commitments and contingencies:
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Term
|
Agreement
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Monthly
Expense
|
|
|
|
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8/15/07
– 8/14/12
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Preferred
Vendor Agreement (a)
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n/a
|
|
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8/15/07
– 8/14/12
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Product
Development Agreement (b)
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n/a
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8/15/07
– 8/14/12
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Trademark
Assignment (c)
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n/a
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9/28/07
– 8/31/12
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Lease
Agreement (d)
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$26,000
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a.
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The
Company had entered into a five-year Preferred
Vendor Agreement with two restaurant establishments
owned by the former member of Artisanal Cheese,
LLC, pursuant to which the Company will supply the
restaurants or their affiliates with any and all
premium cheese products at a high volume discount
and at prices not to exceed prices offered to other
customers, and the restaurants are to purchase
exclusively from the Company provided the Company
can meet terms and conditions acceptable to the
restaurants. The Preferred Vendor
Agreement also provides for a credit to the
restaurant establishments which credit shall be
applied to the first $228,000 worth of product, not
to exceed $57,000 in any calendar
quarter. This credit is the result of
the payoff in full at the closing of Artisanal by
one of its former members of a certain loan to the
Company. (See Note 8, Notes
Payable).
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b.
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The
Company had entered into a five-year Product
Development Agreement pursuant to which the Company
shall have a “first-look” right and
30-day exclusivity period to evaluate and negotiate
in good faith a distribution arrangement (including
minimum orders, exclusivity, prices/royalty rates
and terms) for all new cheeses, cheese related
products and other products developed by the two
restaurant establishments owned by the former
member of Artisanal Cheese, LLC. After
the 30-day exclusivity period, the Company will
have an opportunity to match any terms and
conditions of a distribution agreement that the
restaurants may subsequently reach with a third
party. The Agreement provides for a
written trademark license from the Company to the
restaurants upon terms to be mutually agreed upon
with respect to any distribution by the restaurants
under the Artisanal brand of such new products
other than distribution by the Company.
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c.
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The
Company had entered into a Trademark License
Agreement pursuant to which the Company granted a
royalty-free license to the two restaurant
establishments to use the trade name
“Artisanal Fromagerie & Bistro” and
the derivative logo (consisting of an oval design
with four stylized sheep seated in front of a barn
and the words “Artisanal Fromagerie –
Bistro – Wine Bar”) in connection with
the operation, distribution and sale of cheese,
cheese products and other food products from the
restaurant establishments or their affiliated
restaurants or retail stores. In October
2009 this mark was assigned to the Licensees in
accordance with the agreement.
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d.
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Upon
closing the acquisition of Artisanal Cheese LLC in
August 2007, the Company negotiated a new five-year
lease for approximately 10,000 square feet
commencing September 28, 2007, subject to rent
increase of approximately ten percent per annum.
The current lease payment is approximately $26,000
per month. The leased space consists of
all executive and sales offices, five cheese aging
caves, a packaging and shipping facility, a
customer call center and a 1,000 square foot cheese
center consisting of a fully-equipped kitchen,
classroom and presentation area with two large flat
screen television panels used for conducting cheese
education courses and third-party special
events. From this facility the business
distributes its line of Artisanal Premium Cheese
products to fine food wholesalers, specialty food
outlets, restaurants and through its catalogue and
Website. The lease has been extended to February
2013 with a option to extend through May
2013.
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The
Company's subsidiary is currently involved in a couple of
legal proceedings that are incidental to its
operations. None of these proceedings may have,
or have had in the 12 months preceding the date of this
report, a significant effect on the financial position or
profitability of the Company or its subsidiary:
CIT
Technology Financing Services, Inc. v. Artisanal Cheese,
LLC, New York Supreme Court (New York), Index No.
06159/10 – Plaintiff sought approximately
$107,000 pursuant to two copier leases. The
Company negotiated a settlement with plaintiff to
resume monthly payments for the copiers. The
Company is in default of the settlement agreement as it is
five months in arrears as of the date of this
filing. A judgment has not been entered to
date.
Christopher
Calise and Perry Lerner v. Artisanal Cheese, LLC, New York
Supreme Court (New York County), Index No.
5073/2010. Plaintiffs each loaned $50,000
to the Company on or about July 10, 2009. In
June 2010, they commenced an action for unpaid interest and
requesting acceleration of the loan. The Company
negotiated a settlement with plaintiffs to pay off the note
by December 31, 2011. As of the date of this
filing, plaintiffs have been paid in full.
Central
Business Solutions v. Artisanal Cheese, LLC New York City
Civil Court (New York County), Index No. 043515/2010. Plaintiff
is seeking approximately $13,000 for equipment maintenance
services. The Company rejects Plaintiff's claim
in full and has counterclaimed for damages resulting from
Plaintiff's breach of contract, misrepresentation and
fraud.
Charles
Knott v. Artisanal Cheese, LLC, New York Supreme Court (New
York County), Index No. 5073/2010. In
July 2012, plaintiff commenced an action to recover unpaid
principal and interest of a $150,000 loan made to the
company which matured on December 31, 2011. An
answer has been filed and the Company is attempting to
negotiate a settlement with the lender to pay down the
note.
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